London property sales are up 40% despite Brexit, according to mortgage lender Halifax, as the uneasy market has made it the best time for Briton’s to buy a home.
But uncertainty caused by the EU referendum and changes to stamp duty tax rates in April has meant property growth is slowly down significantly.
Halifax reported that property prices across Britain only grew 1.2% in the last three months to £217,000.
“There is evidence that the underlying pace of house growth may be easing,” said Halifax housing economist Martin Ellis.
“House prices in the three months to June were 1.2% higher than in the previous quarter; down from 1.5% in May. The annual rate of growth fell from 9.2% in May to 8.4%; the lowest since July 2015. House prices continue to increase, albeit at a slower rate, but this precedes the EU referendum result, therefore it is far too early to determine any impact since.”
But the analyst conceded that it was too early to determine the absolute effect of Brexit on property prices.
Nonetheless, uncertainty is causing more Brits to put home buying on hold in case they need the cash in event of an economic downturn, meanwhile foreign investors are holding off investment buys until the Brexit storm clears.
Last week saw a total of seven investment firms suspend trading in their property funds, freezing £15bln of assets.
April’s stamp duty tax changes meant fewer people were buying properties, Halifax said it had already killed off price growth.
“The introduction of higher stamp duty tax rates for buy to let and a second home in April has had a substantial impact on house sales in recent months. A rush to complete sales ahead of the tax change caused a sharp rise in March, which was followed by a substantial decline in April.”
Prime real estate sales in London increased in the week following the referendum, as the weakened pound attracted investors. Sales increased almost 40%. Month-on-month sales were up by 29% according to real estate broker Knight Frank.
But, as the FTSE 100 bounces back and the pound beings to recover, analysts do not expect the surge to last.
Average prices in many of London's most exclusive areas fell by 0.2% in the month leading up to the referendum, compared to the month before.
"Our view is that it is early days and everyone is waiting to see what the terms will be between the UK and Europe," said analysts at Knight Frank.
The broker expects the property markets to slow through July and August.
However, while property on the whole is rocky, brokers have their gaze set on two key players in the online world of property selling.
Analysts at Berenberg indicated a potential upside of 24.7% for property website Zoopla (LON:ZPLA), signifying the online property portal’s resilience in the face of a possible housing market crash.
Berenberg reaffirmed its buy rating on Zoopla Property Group Plc (LON:ZPLA) and raised its price target from 300p to 320p.
“Brexit is unlikely to be a net positive for Zoopla’s property division in the near term; uncertainty in the housing market and a potential slowdown in transaction volumes could lead to reduced profitability for Zoopla’s clients, the estate agents and developers,” said analysts.
“However, to shareholders’ comfort, our analysis of the potential impact on Zoopla of a sudden housing market crash and recession implies limited to no downside to the current share price.“
According to the broker, Zoopla’s subscription business model and value-add to agency partners makes revenues highly resilient.
Berenberg said that Zoopla’s cost base is predominantly marketing, making it extremely flexible, allowing the company to preserve EBITDA in the event of any shock to revenues.
Analysts also noted that 50% of Zoopla’s revenues derive from the comparison division, uSwitch, which is extremely likely to be a beneficiary of any downturn as consumers seek to save money.
With around a 77% market share, Rightmove (LON:RMV) is the dominant market leader in the UK online property market.
Rightmove is integral to the running of estate agents as online property portals generate 90% of leads, but only a small percentage of totally costs, around 2.5%.
Liberum estimates around £190mln is being spent offline by estate agents and it forecasts this spend to continue to migrate online at the rate of £20-25mln a year.
“The business model will prove robust in what will be a mild downturn and believe this is a fantastic opportunity to buy,” said the broker.